Protectionism and Supply Chain Evolution Reshaping Global Trade, According to UNCTAD

A new report from the UN Trade and Development (UNCTAD) offers a detailed look into the evolving landscape of global trade, highlighting how rising protectionism and shifting supply chain strategies are redrawing the map of international commerce. The latest Global Trade Update from the UN body signals a period of resilience under pressure, with challenges mounting despite a stable start to 2025.

Key Trends in a Shifting Landscape

The UNCTAD report identifies several key trends shaping global trade:

• Rising Protectionism: Governments, particularly in advanced economies, are increasingly resorting to tariffs, subsidies, and industrial policies to favor domestic industries. This trend is triggering retaliatory measures from trading partners and adding new barriers to trade. Policies are also increasingly being tied to economic security and climate goals, further complicating the trade environment.
• Evolving Supply Chains: The report notes that earlier trends like “friendshoring” (shifting production to geopolitical allies) and “nearshoring” (moving production closer to home) have not resulted in significant consolidation. Instead, businesses are now diversifying their trade networks across multiple regions. This strategy aims to reduce risk but also adds complexity to supply chain management.  
• Shifting Trade Dependence: The report observes that some economies, including India, Russia, and Vietnam, have deepened trade ties with specific partners, while others, like Australia and the EU, are working to reduce reliance on traditional markets. This suggests a more fragmented and multi-polar trading world.
• Uneven Sectoral Growth: Trade growth varies significantly by industry. While sectors like agri-food, communication technology, and transport have seen gains, energy, apparel, and extractive industries have experienced slower growth, influenced by weaker demand and policy changes. Shipping trends, including falling freight indices, also point to a slowdown in goods trade-dependent sectors.  

Challenges and Opportunities

The report warns that rising protectionism and shifting policies risk distorting competition, particularly in key sectors like clean energy, technology, and critical raw materials. These trends add to economic uncertainty and could prompt new tariffs, restrictions, or investment shifts.  

For developing countries, navigating this shifting landscape presents both challenges and opportunities. While some face difficulties due to protectionist measures and supply chain disruptions, others may benefit from the diversification strategies employed by larger companies seeking alternative production or sourcing locations. The report also highlights the increasing importance of critical minerals, like copper, in the new green and digital economy, noting challenges in supply concentration and the need for investment in processing and recycling capacity.  

Call for Cooperation

UNCTAD emphasizes that in this environment of growing trade uncertainty, global cooperation and balanced policies are critical. While factors like stimulus measures in some economies and lower inflation could offer some support to trade, the dominant risks stem from protectionism and unpredictable policy shifts in major trading nations. The challenge for 2025 is to prevent further global fragmentation and manage policy adjustments in a way that supports long-term, resilient growth worldwide.

Source – aimms, unctad